ConocoPhillips files for pads portion of WNS Pipeline Replacement project

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5

l F I N A N C E & E C O N O M Y

l F I N A N C E & E C O N O M Y

Vol. 26, No. 35 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of August 29, 2021 • $2.50

l G O V E R N M E N T

see PIKKA VALUATION page 6

9th Circuit says ConocoPhillips NPR-A exploration case moot

In an Aug. 24 order the U.S. Court of Appeals for the 9th

Circuit declared moot a lawsuit challenging the legality of the

Bureau of Land Management approval of ConocoPhillips

exploration drilling in 2018-19 in the National Petroleum

Reserve-Alaska. The court requires the federal District Court

in Alaska to vacate the case.

The exploration in question involved the drilling of up to six

exploration wells in or near the Bear Tooth unit, together with

the construction of ice roads, ice pads, an airstrip and tempo-

rary accommodations. Environmental organizations and the

village of Nuiqsut had appealed the approval of the exploration

see LINE 3 page 10

Line 3 to the rescue; Enbridge upgrades pipeline to Wisconsin

Canada is within months of achieving a

rare objective — starting shipments of

Alberta oil sands crude to U.S. customers.

Enbridge, North America’s largest crude

pipeline company, has astonished Canadian

producers with a bold prediction that the

upgrading of its aged Line 3 through the

U.S. Midwest will — despite ongoing

legal, regulatory and protest activities — be

“full in service” in this year’s final quarter.

If accurate, the forecast will see ship-

ments of heavy crude from the Alberta oil sands grow to 760,000

barrels per day from 370,000 bpd, which Chief Executive Officer

BC spurs hydrogen, rolls out strategy for decarbonization goals

The British Columbia government is joining a fast-expand-

ing international movement to produce hydrogen through a

newly released strategy it believes will provide the framework

to scale back on the use of fossil fuels and set a path to net-

zero carbon emissions by 2050.

But some environmental groups have expressed disap-

pointment that the province is still embracing natural gas

when climate change should be the overriding priority.

The strategy is designed to spur investment in what the

government views as a clean alternative fuel, targeting a series

of short- and long-term goals, including a framework for B.C.

regulators to work with hydrogen industry players and regula-

tions for hydrogen production.

see HYDROGEN STRATEGY page 7

see COURT RULING page 10

Badami not for sale Good time to hang onto acreage with Armstrong, Eni strong on E. North Slope

By KAY CASHMAN Petroleum News

On Aug. 23, Stephen Ratcliff, president

of Glacier Oil and Gas, told

Petroleum News that the Badami oil field is

no longer for sale.

The eastern North Slope unit is operated

by Savant Alaska, a Glacier company.

In November, Badami was posted for

sale with BMO Capital Markets Energy

Group, but a few months later it was taken down.

The next place Badami was listed was on

Datasite.com under the site name Grizzly. It disap-

peared from that website at least two months ago.

One PN source said in his “humble opinion”

Glacier needed to “chill out” on a Badami

sale as they were selling into a “super bad

market. Oil could be $100 a barrel a year

from now.”

Not to mention that Badami’s 38,500

barrel-a-day processing plant, pipelines,

airstrip and multiple access points could

serve as a hub for the area.

Badami problematic for BP BP brought the Badami oil field into

production in August 1998. It was first in a “string of

pearls,” or new pipelines between undeveloped oil

discoveries on Alaska’s North Slope, to make their

Willow field on hold District Court upholds challenges to EIS & polar bear biological opinion

By ALAN BAILEY For Petroleum News

T he federal District Court in Alaska has

upheld appeals challenging the validity of the

environmental impact statement and the associated

polar bear biological opinion for ConocoPhillips’

Willow oil field development in the northeastern

National Petroleum Reserve-Alaska.

The upshot is that ConocoPhillips will not be

able to start any on-the-ground work to develop the

field until the Bureau of Land Management has

reworked and approved the EIS, and the Fish and

Wildlife Service has reworked the associated bio-

logical opinion. ConocoPhillips had hoped to start

gravel work and road construction for the project

in February of this year.

Rebecca Boys, media and advertising director

for ConocoPhillips Alaska, told Petroleum News

on Aug. 25 that the company is reviewing the court

decision and evaluating the options for the Willow

project.

A major Nanushuk development Willow is planned as a major North Slope oil

field, producing oil from the Nanushuk formation in

the Bear Tooth unit, west of the Greater Mooses

Tooth unit, where oil is already being produced. Oil

production at Willow is projected at 160,000 barrels

per day, with the field having production capacity of

Oil snaps right back 7-day slide reversed in 3 days on dollar weakness and hopeful COVID news

By STEVE SUTHERLIN Petroleum News

A laska North Slope crude catapulted out of a

seven-day-long losing streak on Monday Aug.

23, up more than 5% — a gain of $3.51 — to close at

$68.46 per barrel. West Texas Intermediate jumped

$3.32 higher to close at $65.64, while Brent added

$3.57 to close at $68.75.

The price jump was underpinned by a 0.4% slide

in the dollar index, which had hit its highest level in

more than nine months Aug. 20.

Price gains were accelerated by a fire that broke

out on a Pemex offshore rig in the Gulf of Mexico

Aug. 22, taking 440,000 barrels of oil per day —

almost one quarter of Mexico’s production — offline.

Five workers died in the blaze, six were injured, and

two were missing.

The fire, in Pemex’s most important oil develop-

ment, Ku-Maloob-Zaap, idled 125 nearby wells that

were dependent on the rig for gas and electricity.

see BADAMI FIELD page 9

see WILLOW DECISION page 8

see OIL PRICES page 11

STEPHEN RATCLIFF

JASON KENNEY

U.S. Energy information Administration reports released Aug. 25 showed that

motorists were continuing to take to the roadways despite the delta variant

breakouts.

With material resource of 1B barrels, is Pikka undervalued?

Among the prospective oil projects

today, Oil Search’s Pikka Phase 1 devel-

opment on Alaska’s North Slope is in the

top 25% for the lowest GHG intensity,

per Wood Mackenzie’s emissions bench-

marking tool.

On schedule to come online in 2025 at

a breakeven price of less than $40 a bar-

rel, a target development IRR of less than

20%, the first phase of the Pikka project

will deliver 80,000 barrels of oil per day.

Independently verified 2C gross reserves for Pikka 1 are

413 million barrels; with total Pikka 2C gross resource at 768

BRUCE DINGEMAN

2 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

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Petroleum News Alaska’s source for oil and gas news

Badami not for sale Good time to keep acreage with Armstrong, Eni strong in region

Willow field on hold Court upholds challenges to EIS & polar bear biological opinion

Oil snaps right back Slide reversed in 3 days on dollar weakness, hopeful COVID news

ON THE COVER

With material resource of 1B barrels, is Pikka undervalued?

9th Circuit says ConocoPhillips NPR-A exploration case mootLine 3 to the rescue; Enbridge upgrades pipeline to WisconsinBC spurs hydrogen, rolls out strategy for decarbonization goals

4 US rotary rig count at 503, a gain of 3

EXPLORATION & PRODUCTIONPIPELINES & DOWNSTREAM

4 Alaska jobs up in July, just not O&G jobs

4 Weiss, Michel named to AGDC board

GEOLOGY

GOVERNMENT

FINANCE & ECONOMY

3 Passionate about drill cuttings

Underutilized samples can generate high quality digital datasets to assist in detailed understanding of sub-surface plays in Alaska

2 AOGCC fines Emerald over Umiat P&A work

Umiat 18 successfully plugged and abandoned, but Emerald House failed to follow commission requirements in completing the work

5 Conoco files for pads portion of project

Western North Slope Service Pipeline Replacement includes expansions of Kuparuk CPF2 pad, Colville River unit MIGI pad

contents

l G O V E R N M E N T

AOGCC fines Emerald over Umiat P&A work Umiat 18 successfully plugged and abandoned, but Emerald House failed to follow commission requirements in completing the work

By KRISTEN NELSON Petroleum News

Emerald House, a wholly owned subsidiary of 88

Energy, acquired the Umiat oil field in the National

Petroleum Reserve-Alaska in early January.

This spring, Emerald House plugged and abandoned

one of the existing wells at the field, completing the work

April 2, but that work wasn’t done according to require-

ments set out by the Alaska Oil and Gas Conservation

Commission, which ensure the work is done properly,

and AOGCC has fined the company $40,000.

In a June 10 letter, AOGCC Chair Jeremy Price told

Erik Opstad, vice president of Emerald House, that the

company “failed to comply with the conditions imposed”

in the work procedures it set out.

Four issues were cited:

•Cement pumping began into tubing and tubing-casing

annulus of the well on March 22, but the cementing pro-

cedure was submitted to the commission March 24. Prior

approval of the commission is required before beginning

cementing operations.

•An attempt to pump cement into the ¼-inch chemical

injection line on March 23 was not successful and cement

plugs were pumped into the tubing and tubing-casing on

March 22. The commission required cementing the

chemical injection line before pumping cement plugs into

the tubing and tubing-casing annulus.

•Daily operation summaries were submitted to the

commission on March 25 and April 1, 2 and 3, but plug

and abandonment operations were begun March 20. The

commission required daily reports once operations begin.

•The commission’s regulations require reservoir

cement plug verification before placing the cement plug.

This procedure was changed without prior AOGCC

approval and cement was pumped to the surface in both

tubing and tubing-casing annulus “eliminating the

required plug tag and pressure test verifications,” the

commission said.

Emerald House response In a June 30 response to the commission, Opstad

“Mitigating circumstances include no injury to the public or the environment by the

unapproved changes, and no history of noncompliance by Emerald House.”

—AOGCC

see AOGCC FINE page 3

enclosed a check for the $40,000, but

said: “Although somewhat imperfect in

its procedural execution, it is hard for us

to see given the extenuating circum-

stances and positive outcome how a

$40,000 penalty is warranted.” Opstad

asked for reconsideration of the amount

of the penalty.

Opstad said that after receiving the

AOGCC’s June 10 letter, “Emerald

House management conducted an inter-

nal review of the Umiat-18 field work.

The elements of noncompliance revealed

by that assessment, did not materially

differ from those cited by the AOGCC in

items 1 through 4 on page 2 of 3. In that

regard, we concur with the Commission’s

finding that Emerald House did violate

the provisions of 20 AAC 25.507

(‘Change of an approved program’)

while performing abandonment opera-

tions at Umiat-18 and in accordance with

that determination enclose herewith the

civil penalty of $40,000.00.”

In asking the commission to review

the amount of the penalty, Opstad said.

“From our perspective, the deviations

from the conditions of approval imposed

by Sundry 321-114 were largely the

result of some initial confusion on the

part of the field team given the federal &

state duopoly in NPRA, coupled with the

unprecedented impact of required

COVID-19 protocol compliance and a

number of communication challenges

posed by the Umiat-18 site itself that

included: limited snow trail access, no

cell phone coverage, poor satellite links,

no line of sight radio tie in due to terrain

issues, weather imposed access con-

straints, plus a host of other minor hur-

dles that made this site uniquely chal-

lenging.”

Commission decision In a decision and order issued Aug.

19, the commission said it had already

considered statutory mitigating circum-

stances.

“Emerald House’s lack of good faith

in its attempts to comply with the

imposed conditions, the potential seri-

ousness of the violation, and the need to

deter similar behavior in future opera-

tions are the factors which most heavily

influenced AOGCC’s decision and the

penalty being assessed.”

It said the conditions of approval for

the work “were clearly written.”

“Verbal discussions occurred with

Emerald House representatives responsi-

ble for plug and abandonment operations

at Umiat-18 through the work planning

and implementation. Mitigating circum-

stances include no injury to the public or

the environment by the unapproved

changes, and no history of noncompli-

ance by Emerald House.”

The commission also noted it had not

imposed per-day assessments, thus

reducing the amount of the penalty.

In its findings the commission said:

“Emerald House’s argument suggests

that a technical success for the plug and

abandonment operations should some-

how overshadow compliance with clear

and specific regulatory requirements,

including conditions of the Sundry

approval.”

AOGCC said Emerald House violated

regulations “by failing to obtain prior

approval for changes to the approval con-

ditions” for the work and said the compa-

ny “has not provided any factual infor-

mation that would warrant changing the

penalty amount.”

The company has 20 days to request

reconsideration. l

PETROLEUM NEWS • WEEK OF AUGUST 29, 2021 3

uttings needs

alaskAgy industvicing the enerOG, serGEOL

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son, Alaskkaa District Manager |+1 907-227-3365 | j.carson@geolog.com

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continued from page 2

AOGCC FINE

l G E O L O G Y

Passionate about drill cuttings Underutilized samples can generate high quality digital datasets to assist in detailed understanding of sub-surface plays in Alaska

PETROLEUM NEWS

Drill cuttings are an invaluable source of quality organ-

ic and inorganic geological data and yet are often

underutilized. Hundreds of thousands of cuttings are stored

in warehouses and repositories across the length and

breadth of the country, spanning decades of drilling activity.

Alaska’s largest and most comprehensive archive of

geologic samples — the Geologic Materials Center, or

GMC — in Anchorage, stores approximately 500,000 cut-

tings from offshore and onshore wells on federal, state and

private land across the state, covering decades of explo-

ration and development. In addition, large oil and gas com-

panies store additional proprietary cuttings samples.

The GMC is dedicated to helping geoscientists and the

public understand Alaska geology through the acquisition

and preservation of physical and digital collections.

“With the onset of new analytical technologies and AI

driven software applications, all these samples could gener-

ate high quality digital datasets that will assist in detailed

understanding of sub-surface plays at a fraction of the cost

of drilling a new exploration well,” Dr. Guy Oliver, a 25

year-plus veteran in the upstream oil and gas sector and a

fan of the GMC, told Petroleum News.

Standard techniques are now available to correctly and

accurately depth-match fresh and historic samples to wire-

line log suites.

Preparation key “The key to unlocking this digital data revolution from

cuttings is to understand how to properly and consistently

prepare each sample for analysis, and which types of analy-

ses will yield valuable and correlatable data,” Oliver, who

describes himself as passionate about cuttings, said.

“Consistent sample preparation is key when trying to

interpret and correlate data from samples acquired by dif-

ferent vendors/operators.”

Understanding “base mineralogy, potential organic rich-

ness and mud type are some of the important factors to con-

sider when making sure a sample is properly prepared.

Correct washing and drying procedures are fundamental for

preserving mineral species and evidence of hydrocarbons,”

Oliver said.

Once correctly washed and dried, “a base analytical

workflow should be undertaken to ensure that every sample

is consistently measured, thus allowing for confident corre-

lations sample to sample, well to well, and both vertically

and laterally across the basin/play/asset,” he said, noting

that typically, this base workflow could consist of digital

photography, grainsize and shape determination, digital

color images (both white light and UV light) color averag-

ing and elemental data.

Beyond this base workflow, on a case-by-case basis,

“additional valuable data can be obtained, such as bios-

tratigraphy, mineralogical data, and organic richness and

maturity,” Oliver said.

All these collected digital data can be used to help “con-

strain rock physics models or as input to regional or field

subsurface models. Reliable, accurate and consistent data is

the key to unlocking or confirming regional and field spe-

cific reservoir/seal trends,” he said.

And with Big Data and AI technologies now readily

available to all, Oliver said having access to these vast

“integration ready” datasets will revolutionize the way we

explore for, or appraise, our energy assets.

Cuttings can be a “relatively inexpensive but incredibly

valuable dataset” that could help to unlock the future poten-

tial of our energy plays for years to come, he said.

“As an industry, we need to make the most of these

datasets, by digitally unlocking their data potential and hav-

ing the confidence to use these data in our subsurface eval-

uations,” Oliver said.

GMC’s mission The mission of the GMC is to permanently archive,

index, protect, and make available for public inspection,

accessible geologic materials and related data to help

advance exploration and knowledge of Alaska’s natural

resources.

On its website the GMC lists the following statistics:

• 3,096 Alaska energy wells

• 26,500,000 feet of energy strata drilled

• 16,700,000 representative feet of energy core and

cuttings

• 76,000 linear feet of energy core

• 22,000 Alaska minerals boreholes

• 766,000 feet of mineral rock drilled

• 617,000 representative feet of mineral core and

cuttings

• 354,000 linear feet of mineral core

• 250,000 processed slides and thin sections

• 507,000 surface samples l

“Reliable, accurate and consistent data is the key to unlocking or confirming regional and

field specific reservoir/seal trends.” —Dr. Guy Oliver

4 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

ADDRESS P.O. Box 231647 Anchorage, AK 99523-1647 NEWS 907.522.9469 publisher@petroleumnews.com CIRCULATION 907.522.9469 circulation@petroleumnews.com ADVERTISING Susan Crane • 907.770.5592 scrane@petroleumnews.com

OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 26, No. 35 • Week of August 29, 2021

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to:

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Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of the individuals

listed above work for independent companies that contract services to Petroleum Newspapers of Alaska

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Call today: 281-978-2771

EXPLORATION & PRODUCTIONUS rotary rig count at 503, a gain of 3

The Baker Hughes U.S. rotary drilling rig count was 503 the week ending Aug. 20,

up three from 500 the previous week and up by 249 from 254 a year ago.

When the count dropped to 244 in mid-August 2020 it was the lowest the domestic

rotary rig count has been since the Houston based oil-

field services company began issuing weekly U.S.

numbers in 1944.

Prior to 2020, the low was 404 rigs in May 2016.

The count peaked at 4,530 in 1981.

The count was in the low 790s at the beginning of

2020, where it remained through mid-March, when it

began to fall, dropping below what had been the his-

toric low in early May with a count of 374 and con-

tinuing to drop through the third week of August

2020 when it gained back 10 rigs.

The Aug. 20 count includes 405 rigs targeting oil,

up by eight from the previous week and up 222 from 183 a year ago, with 97 rigs tar-

geting gas, down by five from the previous week and up by 29 from 59 a year ago,

and one miscellaneous rig, unchanged from the previous week and down by one from

a year ago.

Thirty of the rigs reported Aug. 20 were drilling directional wells, 454 were drilling

horizontal wells and 19 were drilling vertical wells.

Alaska rig count unchanged The Louisiana rig count (49) was up by two from the previous week.

New Mexico (80), North Dakota (22), Ohio (12) and Utah (11) were each up by a

single rig.

Texas (231) and West Virginia (9) were each down one rig from the previous week.

Counts in all other states were unchanged, week-over-week: Alaska (4), California

(6), Colorado (11), Oklahoma (30), Pennsylvania (19) and Wyoming (16).

Baker Hughes shows Alaska with four rigs active Aug. 20, unchanged from the

previous week and up one from a year ago, when the state’s count stood at three.

The rig count in the Permian, the most active basin in the country, was up by two

from the previous week at 247 and up by 120 from a count of 127 a year ago.

—KRISTEN NELSON

Baker Hughes shows Alaska with four rigs

active Aug. 20, unchanged from the

previous week and up one from a year ago, when the state’s count

stood at three.

FINANCE & ECONOMYAlaska jobs up in July, just not O&G jobs

Alaska’s July job count was up 5.8% year-over-year, the Alaska Department of

Labor and Workforce Development said Aug. 20, an increase of 17,700 jobs.

The 325,300 nonfarm jobs were still 30,100 fewer than the July 2019 count of

355,400.

While the statewide job count gained, there was

no change in the number of oil and gas jobs, 6,800,

the same as the June count, down 800, 7%, from a

July 2020 count of 11,400, and down 3,100 from a

July 2019 count of 13,700.

Alaska oil and gas employment peaked at

14,800 in 2014.

The industries which saw the largest employ-

ment gain were those hardest hit last year, although

the department said few industries reached their

pre-pandemic levels. Leisure and hospitality jobs were up 5,100 over last July, but still

10,800 below July 2019. Trade, transportation and utilities gained 5,200 jobs year-

over-year, but that count was still 6,000 below 2019.

Labor said the local government job count was up 600, but still 2,900 lower than

July 2019, while state government employment was up 100 from July 2020, but still

down 1,100 from 2019. Federal employment was higher by 400 over 2020 and by 700

over 2019. Alaska’s seasonably adjusted unemployment rate remained 6.6% in

July, compared to the U.S. rate, which fell from 5.9% to 5.4%.

—KRISTEN NELSON

Weiss, Michel named to AGDC board Alaska Gov. Mike Dunleavy has named Janet Weiss and Dennis Michel to the

Alaska Gasline Development Corp. board of directors, the governor’s office said in

an Aug. 23 press release.

Weiss, formerly president of BP Alaska, will fill a seat which is currently empty;

her term begins Aug. 23 and runs through Dec. 1, 2025.

Michel will join the board Dec. 1 this year, with a term running through Dec. 1,

2026. The governor’s office said Michel will fill the seat held by Doug Smith, who

did not wish to be reappointed to the board. Smith is currently board chairman.

The governor’s office said Weiss received her Bachelor of Science in Chemical

Engineering from Oklahoma State University and has more than 35 years’ experi-

ence in the oil and gas industry in various engineering and leadership roles for ARCO

and BP, including president of BP’s Alaska region for 7 years.

Michel received his Bachelor of Science in Business Administration from the

University of Southern California, Marshall School of Business and his Master of

Business Administration with a concentration in corporate finance from the

University of Denver.

He has more than 17 years’ experience in finance and information services in

management and consulting.

No upcoming board meetings were posted on the AGDC website when this issue

of Petroleum News went to press. The board most recently met in February; a June

board meeting was cancelled due to lack of a quorum.

—KRISTEN NELSON

GOVERNMENT

The industries which saw the largest employment gain were those hardest

hit last year, although the department said few

industries reached their pre-pandemic levels.

By KRISTEN NELSON Petroleum News

ConocoPhillips Alaska is continuing the

process of permitting for its Western

North Slope Service Pipeline Replacement

project, which includes pipelines and pad

expansions. A public notice on the applica-

tions for pad expansions was posted Aug. 19

by the Alaska Division of Oil and Gas.

Expansions would occur at the Central

Processing Facility 2 pad in the Kuparuk

River unit and the Miscible Injection/Gas

Injection pad in the Colville River unit. The

division said in the public notice that the pad

expansions will accommodate new modules

and equipment in support of the WNS

Project.

In its Aug. 2 application ConocoPhillips

Alaska said expansion of the MIGI pad

would add 0.7 acre on the northeast side,

while the CPF2 expansion would add to the

south and east sides.

The company said project work is

expected to begin Nov. 1 and be completed

by June 30, 2024.

CPF2 at Kuparuk The CPF2 pad expansion will allow the

company to install a new remote electrical

and instrumentation module, and pump and

pigging facilities for delivery of seawater

and diesel to the Alpine Central Processing

Facility. Existing infrastructure will be used

during construction.

The CPF2 pad expansion will also

accommodate a new diesel tank truck load-

ing area and diesel storage tanks.

Some 13,000 cubic yards of clean gravel

fill will be placed on 0.7 acres of wetlands

and 0.3 acre of gravel pad sides on the south

and east side.

ConocoPhillips said pipeline compo-

nents of the project are being permitted sep-

arately with the State Pipeline Coordinator’s

Section and include replacing the existing

12-inch Alpine utility pipeline with a new

20-inch pipeline to transport seawater from

CPF2 to the existing MIGI pad on a new

pipe rack. The project also includes installa-

tion of a new 4-inch products pipeline to

transport diesel and other products from

CPF2 to ACF on a spare slot on the existing

Alpine sales oil pipe rack.

Horizontal directional drilling will be

used at the Colville River for both pipelines

and “will require constructing two new

HDD transition pipeline pads north of the

existing Alpine HDD location on the east

and west sides of the Colville River,”

ConocoPhillips said.

The CPF2 project could begin as early as

Aug. 1, 2022, and will be completed by Dec.

31, 2023, “when all supporting infrastruc-

ture at the CPF2 pad expansion is installed,”

the company said.

MIGI at Colville River unit Expansion of the MIGI pad at the

Colville River unit will require some 8,000

cubic yards of clean gravel fill. The MIGI

pad is north of CD4 in the Colville River

pad.

“The existing MIGI pad is a wide area of

the existing CD4 road, and the pad expan-

sion is just north of CD4,” ConocoPhillips

said.

The expansion will allow for a new

remote electrical and instrumentation mod-

ule “and a pigging module to contain pig-

ging receivers and launchers” in support of

the WNS Service Pipeline Replacement

project.

The company said the expansion will add

some 180 feet by 195 feet to the existing

pad. Gravel placement will be over one win-

ter season. Gravel sources being considered

are the ASRC Mine Site, the Willow Mine

site or a mine site in the Kuparuk River unit.

“The permitted WNS Resupply Ice Road

will be used to support the project,”

ConocoPhillips said, with other ice permit-

ted through the North Slope Borough.

Pipelines In an Aug. 2 application to the State

Pipeline Coordinator for a right-of-way

lease for a new Western North Slope 4-inch

product line (see story in Aug. 22 issue of

Petroleum News), ConocoPhillips said

work on that project is expected to begin this

November and be completed by June 2024

with a target startup for the pipeline as early

as December 2023.

The 4-inch products line will “import

diesel and other products” for use in the

Colville River unit, the Greater Mooses

Tooth unit and “eventually” at the Bear

Tooth unit “for powering equipment, sup-

porting well work operations, and for freeze

protection of wells.” The 4-inch line will be

placed in a spare slot on the existing Alpine

Sales Oil pipe rack.

An application for the 20-inch utility line

had not yet been posted when this issue of

Petroleum News went to press. l

PETROLEUM NEWS • WEEK OF AUGUST 29, 2021 5

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“The existing MIGI pad is a wide area of the existing CD4 road, and the pad expansion is just north of

CD4,” ConocoPhillips said.

In its Aug. 2 application ConocoPhillips Alaska said

expansion of the MIGI pad would add 0.7 acre on the northeast side, while the CPF2 expansion would add to the south and east sides.

6 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

WHATEVER

WHENEVER

WHEREVER

judypatrickphotography.comCreative photography for the oil & gas industry.

907. 258.4704

million barrels, and the material resource at 968 million

barrels.

Some investors are questioning the value of Oil

Search’s proposed $14 billion merger with competitor

Santos, which will include Pikka and other nearby major

oil discoveries in Alaska. Under the current non-binding

indicative merger proposal, Oil Search shareholders

would own 38.5% of the merged company as compared

with the 61.5% share for Santos shareholders.

But the merger is far from complete. The next steps are

critical:

• Each company must complete its due diligence on the

other, which is anticipated to conclude in early

September.

• During the due diligence period, the parties negotiate

a merger implementation deed which, if agreed to, is

entered when the due diligence is satisfactorily complete.

• Oil Search must prepare and send to its shareholders

a Scheme Booklet containing information on the pro-

posed transaction.

• An Independent Expert Report must be done. Grant

Samuels & Associates has been retained to do it. If they

conclude the merger is in the best interests of Oil Search

shareholders (and that no superior proposal has been

received), their report will be included in the Scheme

Booklet to shareholders.

• The report and Oil Search’s due diligence must

continued from page 1

PIKKA VALUATION

see PIUKKA VALUATION page 7

include an appraisal of the company’s

value — including the worth of its Alaska

acreage, which some investors and

observers say is currently undervalued.

• An Oil Search shareholders meeting

must be held to consider the scheme

(expected to happen by the end of the

year). In order to proceed, the merger with

Santos must be approved by 75% or more

of the votes cast.

• Assuming shareholder approval is

obtained, and that all regulatory approvals

are in hand, shareholders will be able to

exchange Oil Search shares for the new

shares in Santos.

In its half year results presentation on

Aug. 24, Oil Search acting chief executive

Peter Fredricson said the board would

consider competing propositions but was

not actively seeking a better offer.

“I noticed that we were asked by a

shareholder today if we had gone out and

knocked on the doors of everybody else.

But when we’re in a process like you’re in,

you sign non-disclosure agreements and

typically they’ll include ‘no shop, no talk’

type restrictions. And we’re in that envi-

ronment today.” But, Fredricson added, “if

something else was to come in the door

that led to a better outcome, then we have

the ability to step away from the Santos

transaction.”

Slow Alaska sell-down Fredricson said the Santos deal might

slow down a third partner buying into

Pikka because of the uncertainty surround-

ing the process.

The sell-down is underway by which

Alaska operator Oil Search and its partner

Repsol would sell up to 30% (likely 15-15

each) of their interest in Pikka, and possi-

bly nearby acreage to a third party. This is

part of de-risking the project and a com-

mon practice for major oil and gas devel-

opments on the North Slope and around

the world. Oil Search is the lead on the

sell-down process and has said they are

dealing with/have talked to several parties.

Given the favorable coverage Pikka has

received worldwide in industry publica-

tions — and by independent project ana-

lysts — it’s not surprising there is interest.

For example:

—Independent Project Analysis: “As of

June 2021 ... the Pikka Phase 1 Project has

been defined to the best level for a project

at this stage” (IPA is a benchmarking,

research, and consulting organization

devoted to the empirical research of capi-

tal projects and project systems.)

—Ryder & Scott: “The Front-end

Loading (FEL) is well-planned for a major

project of this nature, and, in our opinion,

the Project is set up for success.” (Oil and

gas engineering and geological consult-

ants known worldwide for quality, reliabil-

ity and integrity.)

In the meantime, it is business as usual

for Oil Search operations in Alaska and

elsewhere.

“Transactions … don’t always run full

course and get approved, so our focus is

on continuing to run the business,”

Fredricson said Aug. 24 on the heels of Oil

Search reporting an almost six-fold rise in

its core profit to $139 million for the first

half the year.

In the meantime, the process that is

designed to bring Pikka 1 online is moving

forward.

Dingeman: Alaska progress In their presentations and the Q&A that

followed, Oil Search Alaska President

Bruce Dingeman and Fredricson said the

FEED, or front-end engineering and

design, phase of development for Pikka is

nearing completion.

The Santos deal withstanding, in sup-

port of efforts toward the final investment

decision by Oil Search and Repsol, the

current summer field program is nearing

completion. Work is focused on final

preparation of the Pikka 1 gravel roads

and pads, initially installed in the winter of

2019-20, for use during the next phase of

construction.

With the technical aspects of the Pikka

project tracking well to schedule and

FEED nearing completion, Oil Search and

Repsol are focused on ensuring appropri-

ate risk allocation and funding is in place

prior to taking FID.

They continue to pursue a range of

funding options, including the sell-down

of up to a 30% equity interest, the sale of

midstream infrastructure and other non-

recourse debt funding options.

When asked about the dollar value of

monetizing their midstream infrastructure,

Fredricson said that monetizing midstream

infrastructure around globe has become

very popular. The difference with Pikka is

because it will all be new infrastructure

with much of it yet to be built.

“The value of the build in Phase 1,”

Fredricson said, is a total of “$2.6 billion

with $1.1 billion allocated to drilling and

$1.5 billion for infrastructure. We’ve

talked between $900,000 and $1.2 billion

for infrastructure downstream as the

opportunity.”

Dingeman touted the fact that most of

the 700 permits and approvals needed for

the project are in hand; in particular two

key approvals — the Land Use Agreement

with Kuukpik Native Corp. and the per-

mits from the U.S. Army Corps of

Engineers.

When asked about the recent negative

court decision on the Willow project’s

EIS, Dingeman said Oil Search couldn’t

comment on behalf of ConocoPhillips. He

also noted that Oil Search’s circumstances

were different with Pikka, because the

project is on state, not federal land, and

that the Pikka EIS was “already estab-

lished, we’ve already put gravel in place.”

And while not impossible, a court chal-

lenge was therefore “less likely” at this

stage.

“Pikka is … poised to play an impor-

tant role in improving Oil Search’s GHG

emissions intensity,” Fredricson said.

“The Pikka project is aligned with the

objectives of the Paris Agreement.”

—KAY CASHMAN

PETROLEUM NEWS • WEEK OF AUGUST 29, 2021 7

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Previous peak in 2000 A previous wave of excitement in hydrogen fuel

peaked in 2000 when Ballard Power Systems based in

Metropolitan Vancouver received financial backing from

the B.C. government and attracted global investment.

However, the company’s tests of its hydrogen tech-

nology from 2009 to 2014 on 20 city buses were aban-

doned, scuttling talk of a “hydrogen highway” from B.C.

to California.

But Ballard has quietly continued to pursue its objec-

tives by developing hydrogen fuel cells, holding out

hopes that B.C. will make at least 10 hydrogen stations

available to motorists by the end of this year.

Bruce Ralston, B.C.’s Minister of Energy, Mines and

Low Carbon Innovation, conceded that hydrogen has

“gone through some peaks and valleys over the past 25

years.”

“But I think the difference this time is that it’s recog-

nized widely by a number of countries, research institu-

tions and established clean-tech companies as a fuel that

will enable different countries to achieve the decar-

bonization goals that they want.”

Earlier this year, Ralston announced a program to

provide discounted rates for BC Hydro (a provincially

owned utility) to industrial customers that build or

expand clean energy projects.

Not completely pollution free But it is understood that hydrogen is not a completely

pollution-free fuel.

The process of producing hydrogen emits varying

amounts of carbon, depending on the process that is

used.

“Green” hydrogen relies on low-emitting renewable

electricity, while “blue” hydrogen is derived from natu-

ral gas by a process that captures and stores the carbon

dioxides that would otherwise be released into the

atmosphere.

But “green” hydrogen has manufacturing costs that

are at least triple those associated with the “blue” ver-

sion.

Karen Tam Wu, B.C. director of the Alberta-based

Pembina Institute, a clean energy think tank, said she

was disappointed that the B.C. government will continue

to embrace natural gas as the underpinning of its hydro-

gen production.

Because the government has failed to give priority to

“green” hydrogen it will “miss an opportunity to build a

hydrogen economy on a renewable energy foundation

rather than on fossil fuels,” she said.

Ballard Chief Executive Officer Randy McEwen did

not agree with Wu’s position, saying a “comprehensive

hydrogen strategy for the province will send a strong sig-

nal to investors, boosting economic growth and local

jobs, while positioning B.C. as a leader in the hydrogen

economy.”

Hydrogen plans Currently, a number of European Union countries,

Oman, Saudi Arabia, Western Australia and Alberta have

committed tens of billions of dollars to produce hydro-

gen.

Air Products and Chemicals said in July that it plans

to open a C$1.3 billion facility near Edmonton in 2024,

while Suncor Energy and Atco are working on joint pro-

duction of “blue” hydrogen in Alberta, setting 2028 as

their target date to bring a facility online.

—GARY PARK

continued from page 1

HYDROGEN STRATEGY

continued from page 6

PIKKA VALUATION“If something else was to come in

the door that led to a better outcome, then we have the ability

to step away from the Santos transaction.” —Peter Fredricson

200,000 bpd. Total cumulative production

over 30 years is projected to be 586 mil-

lion barrels. Field development would

involve the construction of up to five drill

sites, a central processing facility, an

operations center pad, up to 37 miles of

gravel roads and an airstrip, as well as the

installation of necessary pipelines.

Alaska’s congressional delegation

slammed the court decision.

“This District Court order vacating key

approvals and permits for Willow is just

plain wrong,” said Sen. Lisa Murkowski.

“In partnership with communities on the

North Slope, ConocoPhillips Alaska has

been responsibly producing oil from the

NPR-A region for decades under the high-

est environmental standards and this pro-

posed project will be no different.

Although this is a setback for Willow, it is

not the end. Even the Biden administra-

tion has come to understand what

Alaskans have always known — that the

Willow project must move forward.”

“Yet again another devastating deci-

sion by this federal judge that promotes

the interests of Lower 48 radical environ-

mental groups waging their unrelenting

war on Alaska’s economy, working fami-

lies, and Native communities,” said Sen.

Dan Sullivan. “This decision won’t do

one thing to help the environment. To the

contrary, it further delays one of Alaska’s

most strategic energy development proj-

ects, which will benefit our adversaries

that produce oil, like Russia, Venezuela

and Iran, whose environmental standards

are some of the worst in the world.”

“Let me be very clear: Judge Gleason’s

decision is terrible for Alaska, our energy

sector, and the countless families it sup-

ports,” said Rep. Don Young. “The

Willow project has immense potential for

our state, and in the wake of the economic

damage caused by the pandemic, we need

it now more than ever. Alaskans have

been responsibly developing our

resources for decades; we do it right.”

Two related appeals The court decision applies to two

appeals raised by several environmental

organizations and Sovereign Inupiat for a

Living Arctic. Under the National

Environmental Policy Act an EIS is

required for a project of the scale of the

Willow development. And, because polar

bears found in the region are protected

under the Endangered Species Act, FWS

has to prepare a biological opinion, to

ensure that any impacts on the bears will

be allowed under the provisions of the

ESA and the Marine Mammal Protection

Act.

Gleason acknowledged the compre-

hensive nature of the analyses that BLM

and FWS had conducted. But she said that

there are some serious errors in the docu-

ments — these errors render the docu-

ments invalid under the applicable

statutes.

Foreign GHG emissions Gleason found the EIS to be invalid, in

part, because it failed to include foreign

greenhouse gas emissions, rather than just

U.S. emissions, as part of the evaluation

of the Willow field’s potential environ-

mental impacts. In reaching this view-

point Gleason referenced a ruling over the

same issue by the 9th Circuit Court, when

in December 2020 that court upheld an

appeal against the EIS for Hilcorp

Alaska’s planned Liberty field develop-

ment in the Beaufort Sea. In the case of

Willow, BLM had argued that an individ-

ual field development would have a neg-

ligible impact on global greenhouse gases

and that there is insufficient reliable data

for foreign emissions. BLM should have

either provided a quantitative estimate of

greenhouse gas emissions from the over-

seas consumption of Willow oil, or

explained more specifically why this was

not possible, together with a more thor-

ough discussion of how foreign oil con-

sumption might alter the carbon dioxide

emissions analysis, Gleason wrote.

Alternatives analysis The second issue over which Gleason

found the EIS to be invalid related to

BLM’s analysis of different alternatives

for the Willow development. Essentially,

the agency had “acted contrary to law” by

basing its analysis on a view that, as a

leaseholder, ConocoPhillips had the right

to extract all possible oil and gas from its

leases, Gleason wrote. A number of pub-

lic comments on the draft EIS had urged

the consideration of more development

alternatives, rather than just the ones con-

sidered in the EIS. The BLM leases do not

allow the lessee to drill wherever it choos-

es, nor do they preclude BLM from con-

sidering alternative development scenar-

ios, Gleason wrote.

The third issue over which BLM had

contravened the law was the manner in

which the agency had failed in its alterna-

tives analysis to meet a statutory directive

to give maximum protection to surface

values in the Teshekpuk Lake Special

Area, Gleason wrote. Essentially, BLM

had not provided an adequate explanation

for its lack of a more detailed study of a

possible development alternative with

modified or no infrastructure in the spe-

cial area, she wrote. The Center for

Biological Diversity, a plaintiff in one of

the appeals, argued that there should have

been alternatives prohibiting permanent

infrastructure in the Teshekpuk Lake and

Colville River Special Areas, or only

allowing drilling during the winter in

these areas.

Polar bear mitigation measures needed

Gleason said that the polar bear bio-

logical opinion is invalid because it lacks

specific mitigation measures that would

need to be taken to protect the bears.

Essentially, the opinion relies on mitiga-

tion measures required under the Marine

Mammal Protection Act, including as yet

unknown MMPA mitigation measures

that will be specified in the future.

Moreover, while on the one hand the bio-

logical opinion states that there would be

some “hazing” of bears to deter bears

from entering worksites or raising safety

issues, the opinion also makes the contra-

dictory statement that there would be no

non-lethal take of the bears, Gleason

wrote. l

8 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

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Better.

continued from page 1

WILLOW DECISIONGleason acknowledged the

comprehensive nature of the analyses that BLM and FWS had conducted. But she said that there

are some serious errors in the documents — these errors render the documents invalid under the

applicable statutes.

The court decision applies to two appeals raised by several

environmental organizations and Sovereign Inupiat for a Living

Arctic.

PETROLEUM NEWS • WEEK OF AUGUST 29, 2021 9

Oil Patch Bits

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

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All of the companies listed above advertise on a regular basis with Petroleum News

AOGA announces 2021 scholarship award winner

The Alaska Oil and Gas Association announced Aug. 23 that Anna DeVolld, age 16, of Soldotna, Alaska, is the winner of its annual $2,500 college scholarship.

DeVolld was selected for her impressive community involve-ment, as well as her response to AOGA’s essay question, which asked applicants to explain what role oil and gas will play in the future as renewable energy sources become more widely available.

DeVolld is a homeschooled eleventh grader within the Kenai

Peninsula Borough School District. She created the award-win-ning educational program Promote Our Pollinators, which pro-vides education about the need for healthy pollinators, especial-ly bees. DeVolld also teaches ballet at Encore Dance Academy and received the President’s Volunteer Service Award two years in a row.

Because of her love of art, photography and writing, she plans to pursue a degree in communications.

DeVolld was selected by a panel with professional back-grounds in oil and gas and education.

She will be formally recognized at AOGA’s annual confer-ence on Jan. 12, 2022, in Anchorage.

CO

URT

ESY

AO

GA

way east from Pump Station 1 of the trans-Alaska oil

pipeline at Prudhoe Bay to the border of the ANWR 1002

area, a total of about 70 miles as a goose flies.

From nearly the beginning, the Badami sands reservoir’s

complex geology — compartmentalized into multiple, dis-

crete sand bodies — rendered the Badami unit challenging

to produce.

Starting early in the field’s life, oil output declined so

severely that BP suspended production on several occa-

sions, with one suspension lasting for two years. Field sus-

pension allowed the Badami sands reservoir pressure to

recharge, as subsurface oil slowly migrated between the

various sand units.

By August 2007 production had fallen to 876 barrels a

day.

Badami was a big disappointment for BP, which had

built a 38,500 barrel-a-day capacity processing plant for the

field.

In mid-2008, BP brought in Savant as a partner and oper-

ator, eventually selling out to the small independent.

While Savant has been more successful with oil produc-

tion from the Badami sands with only one multi-month

shutdown (due to the 2020 oil price crash), the company has

also looked outside the Badami participating area for new

sources of oil.

Savant’s first discovery was in early 2010 with the B1-

38 well, followed by the Starfish prospect’s B1-07 well

which was drilled after Savant became part of Glacier. Both

the discoveries were in the shallow Cretaceous Killian

sands, a Brookian interval, although B1-38 in the Red Wolf

prospect also had oil in the deeper Kekiktuk formation that

contains the oil reservoir for the Endicott field to the west.

As a result of these successes and well work, Savant was

able to keep Badami oil production relatively steady. In

May, output averaged 1,143 barrels per day.

E. North Slope hot spot And if the company can hold out, the future of the east-

ern North Slope looks promising.

Eni is rumored to be planning an eastern Slope explo-

ration project on its 350,000 undeveloped acres.

When Eni purchased the acreage from Caelus in 2018, it

said it planned to “apply its business model and experi-

ence,” involving “fast-track exploration” and “a short time

to market” for the “potential new discoveries.”

Containing 124 state leases in two blocks, the acreage is

relatively unexplored and close to Badami.

Bill Armstrong’s company, Lagniappe Alaska, and 50-

50 partner Oil Search, hold some 275,000 acres south of

Badami, which they expect to be drilling in the next year or

two. That alone will increase Badami’s value, especially if

they find what they expect to. And so far, their track record

for finding oil on the North Slope has been excellent.

But a potential merger between Oil Search and Santos

could slow things down.

Still, a few months ago Armstrong told Petroleum News

in a series of texts that he was very excited “about our

Lagniappe play … We are essentially taking our learnings

from the Pikka/Horseshoe/Mitquq/Stirrup play (all signifi-

cant discoveries) in the west to east of Prudhoe Bay.”

The play concept “is very similar. Multiple zones,

onshore, good gravity oil, reasonably close to infrastruc-

ture,” he said.

“The targeted objectives are slightly younger than what

we have at Pikka et al but with better reservoir qualities —

porosity and permeability — even though they are slightly

deeper,” Armstrong said.

There have been very few wells drilled in the Lagniappe

area, he continued, “and the few wells that have been drilled

were not pursuing the zones that we are. Yet almost all wells

had good oil and gas shows. We are using 3D seismic. We

know what we are looking for due to our big success to the

west.”

Armstrong said Lagniappe and its partner “are pursuing

stratigraphic traps, which are subtle, but now that we know

what they look like, they are identifiable on 3D seismic.

Real big targets.”

Plus, all the Lagniappe acreage is on state leases, he

noted more than once. l

continued from page 1

BADAMI FIELD

Savant Alaska drilled the B1-07 exploration well with Nabors Rig 27E and made its second Killian oil discovery.

JUD

Y P

ATR

ICK

Al Monaco told shareholders will launch a

“critical integrity project that will improve

safety and further reduce environmental

risks, while driving significant incremental

(earnings) growth.” The Calgary-based

company, which expects to carry a record

total averaging 2.8 million bpd in Canada

and the U.S. this year, said it filed procedur-

al regulatory documents with the Canada

Energy Regulator and the U.S. Federal

Energy Regulatory Commission in mid-

August to allow for tolling surcharges on

Line 3 within as little as 30 days.

Sept. 15 effective date It wants the tolls to be effective on Sept.

15, ending a seven-year struggle to com-

plete the C$9.3 billion project from Alberta

to Wisconsin.

The major delays have occurred in

Minnesota, where Enbridge has faced and

mostly overcome its sternest opposition that

continued on Aug. 19 when an estimated

300 protesters shut down Duluth’s Aerial

Lift Bridge for about 30 minutes while they

hung a “Stop Line 3” banner across the

span.

The protesters dispersed when asked by

police and no arrests or injuries were report-

ed.

In contrast to its scuttling of TC Energy’s

Keystone XL pipeline and refusal to endorse

Enbridge’s Line 5 upgrading in Michigan,

the administration of President Joe Biden

has supported permits for Line 3 in the face

of relentless opposition.

Jake Sullivan, Biden’s national security

adviser, lashed out earlier in August at the

refusal by OPEC and allies to boost their oil

output to tackle rising U.S. gasoline prices

which he said that “if left unchecked, risks

harming the ongoing global economic

recovery.”

Kenney joins chorus Alberta Premier Jason Kenney has

joined the chorus in Canada, which has

labelled Biden as “hypocritical, stupid,

pathetic, embarrassing” and other epithets

for favoring OPEC oil over the North

American resources as his disposal.

“The same U.S. administration that

retroactively cancelled Keystone XL is now

pleading with OPEC

and Russia to produce

and ship more crude

oil (to the U.S.). This

comes just as

Vladimir Putin’s

Russia has become

the second largest

exporter of oil to the

U.S. (trailing only

Canada),” he said.

Line 3 is critical for Alberta, where crude

output has surpassed existing pipeline

capacity in recent years, resulting in sharp

discounts for Alberta’s heavy crude against

U.S. blends and the loss of billions of dollars

in government royalties.

Alberta Energy Minister Sonya Savage

said her government was “excited” by the

prospect of Line 3 coming into service.

“Every credible forecast of future world

energy consumption sees strong oil and gas

demand continuing for several decades and

pipelines will be critical to enabling Alberta

to help meet the world’s energy needs,” she

said.

U.S. Congressman from Texas, Dan

Crenshaw, said Biden’s move to give greater

priority to OPEC oil than U.S. oil was

“reaching a whole new level of stupid … not

just stupid but anti-American.”

Savage made no attempt to pull her

punches, suggesting Biden’s initiative con-

tained “irony and hypocrisy all over the

place,” first by cancelling Keystone XL,

then six months later asking OPEC to

replace the 830,000 bpd lost by burying

KXL then by talking about “rapidly transi-

tioning off fossil fuels in the U.S. by 2035,

including any electricity generated by fossil

fuels and phasing out the international com-

bustion engine.”

Other critics suggested Biden should be

celebrating high oil and gas prices because

that should reduce consumption, thus lower-

ing greenhouse gas emissions.

Instead, they observe, Biden is on his

hands and knees begging the OPEC dicta-

torships who fund terrorism against the West

and Western interests.

—GARY PARK

10 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

NO LTA

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program in the District Court. After the District Court

rejected the appeal in January 2020, the appeal was ele-

vated to the 9th Circuit.

Relied on integrated activity plan EIS At the core of the appeal was an argument that BLM

should have prepared an environmental impact statement

for the exploration program, rather than conducting an

environmental assessment linked back to the EIS for

BLM’s NPR-A integrated activity plan, completed in

2012. That IAP envisaged the possibility of oil explo-

ration activities in the region where ConocoPhillips con-

ducted its drilling. Apparently the Bear Tooth exploration

environmental assessment had also made reference to the

supplemental EISs for ConocoPhillips’ nearby drilling in

the Mooses Tooth unit. BLM had also argued that it had

conducted a separate evaluation of impacts on subsis-

tence uses and needs under the terms of the Alaska

National Interest Lands Conservation Act.

BLM and ConocoPhillips had both argued that the

case was moot, given that the exploration in question had

been completed, with a few small surface well caps being

the only remaining evidence of exploration activities.

However, at issue was a question of whether this case

could set a precedent for future court decisions in similar

cases. Should an exploration project of this nature

require its own EIS, rather than relying on the EIS for

the IAP?

Legal criteria In concluding that the case is indeed moot the 9th

Circuit panel of judges considered two legal criteria, both

of which would need to apply were the case to continue:

whether the duration of the exploration program being

challenged was too short to allow full litigation before

completion of the program, and whether there is a rea-

sonable expectation of the same legal challenge in the

future. The court determined that, given that the explo-

ration program in question only lasted five months, the

first of these criteria applied. However, the second crite-

rion failed because of several new circumstances that

have arisen since the District Court’s decision in January

2020, the 9th Circuit said.

Firstly, in 2020 the Council of Environmental Quality

issued new regulations for implementing the National

Environmental Policy Act. And in January 2021

President Biden directed a review of this new rule. As a

consequence it is now unclear whether future challenges

to NPR-A exploration would be adjudicated based on the

old regulations or the new regulations. Moreover, use of

the new regulations would require BLM to use a different

method than previously for the approval of future explo-

ration projects.

New IAP for NPR-A Secondly, in 2020 BLM issued a new IAP for NPR-A,

thus rendering obsolete the 2012 IAP referenced in the

lawsuit. In addition, although BLM says that it is contin-

uing to tier environmental reports for the region at issue

to one of the Mooses Tooth supplemental EISs, that par-

ticular project represents a different development stage

from an exploration project — this would preclude using

this approach for an environmental assessment for future

exploration, the 9th Circuit panel said.

“The panel concluded that this was a unique case

where mootness was not based on a single factor, but on

a multitude of new circumstances, which, together,

showed that the ‘capable of repetition, yet evading

review’ mootness exception did not apply,” the panel

wrote in its Aug. 24 order.

—ALAN BAILEY

continued from page 1

COURT RULING

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PETROLEUM NEWS • WEEK OF AUGUST 29, 2021 11

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On the demand front, fears were quelled

by a report from China’s National Health

Commission that the country had no new

locally transmitted COVID-19 cases on

Aug. 23, for the first time since July.

Oil traders had been rattled by a breakout

of the highly contagious delta variant of the

virus discovered July 20 in the city of

Nanjing, which exploded into the worst out-

break in China since 2020.

In the United States, the Food and Drug

Administration announced Aug. 23 that it

had granted full approval to the first

COVID-19 vaccine.

The vaccine, approved on an emergency

basis as the Pfizer-BioNTech COVID-19

Vaccine, will be marketed as Comirnaty, for

the prevention of COVID-19 disease in

individuals 16 years of age and older, the

FDA said in a release.

The vaccine will continue to be available

under emergency use authorization for indi-

viduals 12 through 15 years old, and for the

administration of a third dose in certain

immunocompromised individuals, the FDA

said.

The approval cleared the way for the

Pentagon to broadly require the shots for

military personnel and will likely lead to

additional vaccine requirements in the

workplace. Health officials are hopeful that

FDA approval will allay fears among vac-

cine-hesitant individuals as well.

Some analysts have postulated that

increased vaccine use will lead to a surge in

business related travel in the fall and winter.

Losses reversed Gains continued Tuesday Aug. 24, with

ANS and Brent both closing above $70.

ANS gained 62 cents Aug. 25, to close at

$71.03, WTI gained 82 cents to close at

$68.36, and Brent gained $1.20 to close at

$72.25. In three days, the indexes turned in

a gain of about 10%, essentially recovering

losses incurred over the seven-day slide that

ended Aug. 20 with ANS had closing below

$65.

U.S. Energy information Administration

reports released Aug. 25 showed that

motorists were continuing to take to the

roadways despite the delta variant break-

outs.

U.S. crude supplies dipped to a level not

seen since January 2020 and gasoline inven-

tories surprised analysts with a robust drop.

U.S. commercial crude oil inventories

for the week ending Aug. 20 decreased by

3.0 million barrels from the previous week

to 432.6 million barrels, about 6% below

the five-year average for this time of year,

the EIA said.

Total motor gasoline inventories

decreased by 2.2 million barrels for the peri-

od, putting them about 3% below the five-

year average for this time of year, it said.

Goldman Sachs remains bullish Early on Aug. 26, Pemex CEO Octavio

Romero told Mexican journalist Carmen

Aristegui that Pemex had so far recovered

71,000 bpd of production shut in from the

platform fire, and the company expected to

add an additional 110,000 bpd later in the

day, according to a Reuters report.

Brent and WTI were just above 0.5%

below Wednesday’s close, in early trading

as Petroleum News went to press.

Some analysts are calling for oil to settle

into the $60s, but Jeffrey Currie, Goldman

Sachs head of commodities research contin-

ues to call for oil to reach $80 in the fourth

quarter.

In a note published Aug. 23, Currie said

that the selloff was overdone in part because

supply has stayed low, and because produc-

ers are investing too little in new projects to

catch up to future demand growth, Barron’s

reported.

Currie said the delta variant “will prove

to be a transient event, and that U.S. produc-

ers will retain their newfound discipline, as

the drivers of our bullish view shift from

cyclical demand impulses to the structural

binding constraints of underinvestment in

supply that were only accelerated by Covid-

19.”

Goldman Sachs said in a note that

appeared on Forex Live that delta and China

are currently overshadowing a tightening

market.

“We believe the micro — steadily tight-

ening commodity fundamentals — will

trump these macro trends as we move

towards autumn, pushing many markets

like oil and base metals to new highs for this

cycle,” Goldman said, adding that the pace

of growth has likely peaked, something that

could dampen other risk trades, but for com-

modities it’s overall demand that matters.

Tracking mobility, Goldman said that the

hit to Chinese demand is only 0.7 million

bpd and that overall global demand remains

near 98 million bpd with demand strong

outside of Asia.

Globally, Goldman sees a 1.5 million

bpd deficit in the past month and “precari-

ously low” storage levels in emerging mar-

kets excluding China. l

continued from page 1

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Some analysts are calling for oil to settle into the $60s, but Jeffrey Currie, Goldman Sachs head of

commodities research continues to call for oil to reach $80 in the

fourth quarter.

Contact Steve Sutherlin at ssutherlin@petroleumnews.com

12 PETROLEUM NEWS • WEEK OF AUGUST 29, 2021

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